It’s not easy to have a week named in honor of a worthy cause, but this week has turned into “Increase and Index the Minimum Wage Week.” In Connecticut, House Speaker Chris Donovan has announced his support for a two-step increase in the state’s minimum wage to $9.75, with indexing after that. In New York, Speaker Sheldon Silver introduced a bill to raise the minimum wage there to $8.50 with indexing after that. And here at EPI, my colleague Mary Gable and I released a paper documenting the positive economic impact of a proposed increase in the Illinois minimum wage. A 2011 proposal to increase the Illinois minimum wage over a four-year period to $10.65 would have put nearly $4 billion in the hands of minimum-wage earners in Illinois, in turn creating approximately 20,000 new jobs (similar forthcoming 2012 legislation would do the same). As if all that wasn’t enough, yesterday we had GOP presidential candidate, Mitt Romney, speaking in favor of indexing the minimum wage.
Of course, this is not a new suggestion. EPI Economist Heidi Shierholz wrote in 2009 that we should “Fix it and Forget it.” And the concept is pretty simple: Rather than having earnings of minimum-wage earners eroded by inflation, let’s put a mechanism in place to ensure that our lowest-paid workers keep up with the increased costs of meeting basic needs. (As seen in the figure, the minimum wage doesn’t have a very good track record of even meeting the federal poverty level, which we know to be a very inadequate measure of what it takes to make ends meet.)
Ten states already have some sort of indexing, including eight states that had automatic increases Jan. 1. Given the disconnect between wages (generally stagnant at the lower end) and both corporate profits and productivity (both doing very well, thank you), it seems that increasing the minimum wage and indexing it to inflation is a very modest proposal. It’s also a small step that can be taken to address the growing income disparity that has drawn so much attention in recent months.